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Chapter
25
Performance Management
347
performance seems to be that it is regarded as a main-
stream business issue, not an isolated “personnel
problem”.’
This is a classic case of reversed causality.
Performance management systems may have gen-
erated successful companies but it is just as likely
that the successful companies were the ones with the
inclination and money to introduce sophisticated
practices such as performance management.
Institute of Personnel Management
It was reported by the IPM in 1992 that their exten-
sive research found no evidence that improved
performance in the private sector is associated with
the pursuit of formal performance management
programmes. Poor financial performers were as
likely to introduce performance management as
good performers. There was no readily available
and comparable measures of performance in the
public sector to test this link, even through per-
formance management is more likely to be adopted
in the public sector.
However, one positive theme that was traced
throughout the research was the extent to which
performance management raised awareness of the
pressures on the organization to perform.
Rodgers and Hunter
A meta-analysis by Rodgers and Hunter (1991) of
70 studies in goal setting, participation in decision-
making and objective feedback (as included in typical
management-by-objectives programmes) found that
69 of them showed productivity gains and only two
showed productivity losses. This led to the conclu-
sion that management by objectives programmes
when properly implemented and when supported by
top management had an almost universal positive
effect on productivity.
Bernadin, Hagan and Kane
Bernardin et al (1995) found improvement in sub-
ordinate and peer ratings following 360-degree
feedback, but no changes in customer ratings or
sales volume.
Guest and Conway
An analysis by Guest and Conway (1998) covered the
388 organizations with performance management
surveyed by Armstrong and Baron in 1998. The key
criteria used for determining the effectiveness of
performance management were the achievement of
financial targets, development of skills, development
of competence, improved customer care and im-
proved quality. Against these criteria, over 90 per
cent of respondents rated performance management
as being moderately or highly effective. The personnel
managers, who in the main responded to the survey,
believed that others, and more particularly senior
managers, are even more positive in their evaluation.
Many also believe that the overall performance of
their organization, judged by internal criteria such as
quality, productivity and cost, and external criteria
such as market share and profitability, are at least
as good and are often better than that of their main
competitors.
But there were caveats. The analysis indicated
that the views of respondents to the survey should
all be viewed with extreme caution since they are
often based on a very limited form of formal evalu-
ation, or on an absence of any formal evaluation.
This raises serious questions about the basis for
the generally positive assessment of performance
management.
Further, more detailed statistical analysis of the
replies to the questionnaire failed to demonstrate
consistent evidence of any link between the practice
of performance management and outcomes such
as the achievement of financial targets, achievement
of quality and customer service goals and employee
development goals. The conclusion reached was that
this survey has produced no convincing evidence
that performance management has an impact on
overall organizational performance.
Gallup
As reported by Risher (2005) Gallup has analysed
its Q 12 survey and found that employers with a
formal performance review process have more en-
gaged employees – 33 per cent versus 21 per cent –
and fewer disengaged employees – 12 per cent versus
29 per cent.
Sibson and WorldatWork
As reported by Kochanski (2007) a survey by Sibson
and WorldatWork found that high performing firms
have strong leadership support for performance
management. An analysis of total return to share-
holders over a three-year period (2003–05) revealed
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